Teck Resources Ltd. and Anglo American PLC have announced a significant merger deal, creating a copper-focused giant valued at around $70 billion. The companies have described the agreement as a “merger of equals,” despite the disparity in their respective values, with plans to distribute upper management and board representation evenly between them.
The newly formed entity, named Anglo Teck, is set to have its headquarters relocated to Vancouver. Teck’s CEO, Jonathan Price, believes this move presents a compelling opportunity for Canada, emphasizing the unprecedented relocation of Anglo American’s global headquarters to Vancouver.
Under the terms of the agreement, Price will assume the role of deputy CEO in the combined company. Additionally, Anglo American’s CEO, Duncan Wanblad, and CFO, John Heasley, will transition to Vancouver to retain their positions at Anglo Teck. Sheila Murray, Teck’s chair, will become the chair of Anglo Teck, with board seats evenly divided between the two companies.
The merger is subject to review under the Investment Canada Act, which has the authority to block transactions deemed detrimental to national interests. Canadian Industry Minister Mélanie Joly highlighted that the government will scrutinize various aspects of the merger, including the commitment to have senior leadership based and residing in Canada.
As part of the deal, there are approximately $4.5 billion in spending commitments to Canada over the next five years. This investment aims to enhance development opportunities in the country, with Price expressing the combined company’s capacity to undertake significant projects like Galore Creek, which might have been challenging for a smaller entity.
Anglo Teck intends to maintain listings on the London and Johannesburg stock exchanges while seeking additional listings on the Toronto and New York exchanges. Despite the incorporation remaining in London, Wanblad reassured that the company’s essence as a Canadian entity will not be diluted.
The merger agreement will see Teck shareholders receive 1.3301 Anglo American shares for each class A and class B share they hold. Anglo American will also issue a $4.5 billion dividend to its shareholders to balance the overall value, resulting in Anglo shareholders holding a 62.4% stake in the merged company, while existing Teck shareholders will retain 37.6%.
The consolidation of the two companies is expected to generate approximately $800 million in annual pre-tax synergies and enhance the value of the Quebrada Blanca project in Chile, especially with the potential collaboration with the nearby Collahuasi mine. Despite operational challenges at Quebrada Blanca, Price believes the merger offers a robust investment opportunity in the copper market.
Shareholders of both Teck and Anglo American have shown positivity towards the deal, as reflected in the rise of share prices for both companies. Teck’s shares surged over 14% on the Toronto Stock Exchange, while Anglo American’s shares rose more than 8% on the London exchange.
The merger includes a $330 million break fee, with expectations of completion within the next 12 to 18 months pending regulatory and shareholder approvals. The approval process necessitates a two-thirds majority vote from Teck’s class A and class B shareholders and a majority vote from Anglo American shareholders.
Noteworthy is the endorsement of the deal by prominent figures like Teck’s chair emeritus, Norman B. Keevil, who sees the merger as a transformative step that unites two reputable companies into a leading mining entity headquartered in Canada.